COVID Market Update
• The Texas Oil and Gas Association said this week that the state had managed to add 700 oil and gas exploration jobs in September. This would be the first increase since the pandemic struck. Although a glimmer of hope, U.S. Energy Secretary Brouillette said this week that he does not expect U.S. oil production to rebound in the United States any time soon. Brouillette expects U.S. oil production to stay around 11 million bpd through 2021.
• In Italy, troubling tanker activity trends are proving a bad omen for the rest of Europe, which is grappling with a second wave of Covid-19. While OPEC is busy talking up how the worst is yet behind the oil industry, Italy’s demand for gasoline dipped by more than 20% in September--a single month drop. Diesel was almost as bad, showing an 18% decrease month over month. Earnings for tankers in that neck of the woods have crashed, and now barely cover operating expenses. This coincides with Italy’s “second wave” of the coronavirus outbreak, and will likely portend what the rest of Europe will experience during other country’s second wave. This week, France announced it would impose a strict month-long lockdown in a desperate attempt to contain the spread.
• New York-based Hess Corp (NYSE: HES) was the latest E&P company to report a bigger loss than expected. In response to a nasty hurricane season that battered its Gulf of Mexico operations and tough market…
COVID Market Update
• The Texas Oil and Gas Association said this week that the state had managed to add 700 oil and gas exploration jobs in September. This would be the first increase since the pandemic struck. Although a glimmer of hope, U.S. Energy Secretary Brouillette said this week that he does not expect U.S. oil production to rebound in the United States any time soon. Brouillette expects U.S. oil production to stay around 11 million bpd through 2021.
• In Italy, troubling tanker activity trends are proving a bad omen for the rest of Europe, which is grappling with a second wave of Covid-19. While OPEC is busy talking up how the worst is yet behind the oil industry, Italy’s demand for gasoline dipped by more than 20% in September--a single month drop. Diesel was almost as bad, showing an 18% decrease month over month. Earnings for tankers in that neck of the woods have crashed, and now barely cover operating expenses. This coincides with Italy’s “second wave” of the coronavirus outbreak, and will likely portend what the rest of Europe will experience during other country’s second wave. This week, France announced it would impose a strict month-long lockdown in a desperate attempt to contain the spread.
• New York-based Hess Corp (NYSE: HES) was the latest E&P company to report a bigger loss than expected. In response to a nasty hurricane season that battered its Gulf of Mexico operations and tough market conditions brought on by crippling demand amid the pandemic, Hess also lowered its production forecast for full-year 2020 and its E&P budget to $1.8 billion from $1.9 billion for 2020. Still, Hess managed to raise its production by 10.7% over last year, mostly thanks to its prolific Liza field in Guyana.
• Italy’s Eni posted a $7.8 euro loss for the previous nine months, with third-quarter losses amounting to 500 million euros. While a major loss, Eni’s results are better than expected despite a 30% dip in oil prices and a 90% decline in refining margins.
• Saudi Arabia has managed to shrink its deficit in the third quarter, to $10.87 billion--a little more than half of what its deficit was in the previous quarter. This, despite a 30% drop in oil revenues for the quarter compared to the same quarter last year. Saudi’s saving grace was a tax hike.
• In a rare move, Exxon has decided not to raise its dividend this quarter--the first time it has failed to lift dividends in nearly forty years. The move is a sign that the supergiant is not immune to the lower-priced environment and demand crash that has taken other oil companies under. Exxon also announced its mostly anticipated job cuts in the U.S. market, following the 1,600 employees it also cut in Europe. For the U.S., Exxon will cut 1,900 jobs, both on a voluntary and involuntary basis.
Politics, Geopolitics & Conflict
• Venezuelan socialist strongman Nicolas Maduro claimed this week that one of the country’s large oil refineries (there are not many--if any--operating at present) suffered a terrorist attack from a “large and powerful” weapon, with two unnamed foreigners were detained prior to the attack. The 635,000 Amuay refinery on the country’s northern coast was in recirculation mode at the time of the incident--the incident which the labor union said could have been caused by a water leak that triggered the blast. The unit suffered so much damage that it may be irrecoverable. Venezuela’s refineries are in such a state of ill repair that it is not inconceivable that the incident was due to neglect. The refineries industrial services had failed last week, but were not shut down, and were instead placed into recirculation mode, which is easier to come back from.
• The Trump administration has imposed new sanctions on the National Iranian Tanker Company (NITC), the National Iranian Oil Company (NIOC), and the Iranian Ministry of Petroleum. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC)’s sanctions include sanctions on Iran’s Minister of Petroleum and 21 other individuals, entities, and vessels.
• Turkish media (and only Turkish media) is creating a fair amount of fanfare around Erdogan’s plans to “commision large-scale investments” into a regional and continental transfer hub that is intended to be an “important center for China’s Belt and Road Initiative (BRI). There is a lot of geopolitical … bargaining to be read into these Turkish media announcements. And, again, it has to do with leverage over the Eastern Mediterranean at a time when Turkey is being left out of this game by new alliances emerging out of Israel's massive discoveries in the Levant Basin. Turkey’s stated aim (other than publicity) is to build a container port in the Eastern Mediterranean, with work on the project to start at some undetermined time in the next year.
Discovery & Development
• Norway-based Wintershall Dea has commenced drilling a well as part of its six-well plan in the Nova field in the Norwegian North Sea. Drilling the first three production wells should take just over a year. It is the last phase of the Nova project.
• Exxon and Japan’s largest power generator, JERO, are entering into a JV to build an LNG project in Vietnam. The project is banking on the fact that Vietnam’s plans to switch from coal and to gas, and on Vietnam’s quick rate of industrialization, which is expected to grow at an annual rate of 20%--doubling over the next decade.
• Qatar Petroleum along with French Total SA, CNR International, and Main Street, made a new gas and condensate discovery this week in the Outeniqua Basin off the coast of South Africa. It is the second significant discovery in Blocks 11 and 12 B--a 19,000 square kilometer block. Total has a 45% working interest in the project and serves as operator, while Qatar Petroleum holds a 25% stake.
• BP has started to produce gas from its Qattameya gas field offshore Egypt in the North Damietta concession (where BP holds a 100% stake). The field, announced in 2017, is expected to produce 50 million cubic feet of gas per day.
Deals, Mergers & Acquisitions
• City gas distributors in China are looking to dramatically increase their purchases of LNG, as the new pipeline operator PipeChina begins to lease out access to its distribution lines and terminals starting in October. Woodside and Centrica are already in talks to supply more of the fuel, and analysts are expecting that China could take as much as 67 million tonnes of LNG this year, surpassing Japan as the world’s top buying by 2022.
• After its huge acquisition of Noble Energy and its game-changing Israel offshore gas assets, Chevron is now in the selling mood. It just reached a deal with EQT Corporation to sell its Appalachian shale assets for $735 million. Chevron has been trying to sell the Appalachian gas assets since late last year after it took a major writedown on the assets as gas inventories increased.
• Next on the list of asset swaps is Texas-based IPR energy which has made a move to acquire UAE-based Dana Gas’ onshore assets in Egypt for $236 million. IPR already has a presence in Egypt.
• India’s Bharat Petroleum Corp (BPCL) is putting its Bina refinery expansion plans and its plan to install another unit at its Mumbai refinery on hold until after the privatization of BPCL is complete. India currently holds a 53.29% stake in BPCL, and it’s looking to ditch its stake in a desperate attempt to generate cash to assist with its growing fiscal deficit. BPCL was planning on privatizing by March of next year, but the pandemic is making this deadline challenging.
Regulations and Legislation
• The U.S. BLM has given the go-ahead to ConocoPhillips for its plan to develop a new oilfield in the North Slope of Alaska known as the Willow Master Development Plan. The Willow project is believed to hold 590 million barrels of reserves and could produce as much as 160,000 bpd over the course of 30 years. Conoco will begin production next year if the remaining regulatory hurdles are successfully passed.
• Sources unauthorized to speak to the media indicated this week that President Trump may be looking to undertake an economic analysis on fracking by way of an executive order. The order would require U.S. agencies to assess the financial impact of fracking, and how it can be expanded.
• Fracking in Colombia hasn’t been legal since 2018, however, Colombia’s state-run oil company Ecopetrol is hoping to implement a few pilot fracking projects by the end of 2021. Ecopetrol has already moved the goalpost for its pilot fracking scheme once, with the last deadline set to expire in the second half of this year. Colombia’s top administrative court insists that the suspension of fracking in 2018 does not apply to pilot projects. Ecopetrol is most eager to dip its toe into unconventional oil production, as it saw its Q3 2020 profit dip by 2/3rds over the same quarter last year.
Renewables
• Denmark’s European Energy is slated to begin building northern Europe’s largest solar farm. The 300MW solar farm, in Aabenraa, will supply 75,000 homes in Denmark, with construction set to begin in early 2021 and grid connection by the end of that year. Denmark is pushing renewables in its question to meet its target for reducing C02 emissions by 70% within the next decade.
• But that’s not Denmark’s only renewable news this week ... Denmark’s Orsted has just acquired a wind project in Nebraska. The 298MW project known as the Haystack Wind Project is located next to another one of Orsted’s wind projects, Plum Creek. Haystack is expected to come online in Q4 2021. Orsted’s land-based wind project portfolio is now 1.4GW.
• Xcel Energy has plans to invest $1.4 billion in solar and wind projects between now and Q2 2021--the largest multi-state wind investment plan in the country. At the same time, it plans on retiring all of its Minnesota coal plants by 2030. Xcel plans to have completely transitioned to clean energy by 2050.
